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On Tuesday, Rosenblatt Securities sustained a positive outlook on shares of Sonos Inc . (NASDAQ: NASDAQ:SONO), reiterating a Buy rating and a price target of $18.00, which aligns with InvestingPro's analysis showing the stock's analyst high target.
The firm's stance comes ahead of the company's earnings report for the December quarter, which is scheduled for February 6. With a gross profit margin of 45.4% and strong cash position exceeding debt, Rosenblatt anticipates results that align with expectations and a cautious outlook for the March quarter.
The recent changes in Sonos' leadership are aimed at steering the company towards a path that emphasizes both product innovation and profitability. While not profitable over the last twelve months, InvestingPro data indicates analysts expect the company to return to profitability this year. Rosenblatt analysts are keen to see how the new leadership team will balance these priorities and are optimistic about the company's future financial performance.
Rosenblatt's valuation of Sonos shares is based on a multiple of 13 times the enterprise value to estimated CY25 EBITDA (earnings before interest, taxes, depreciation, and amortization). This valuation, they suggest, is conservative when considering Sonos' strong brand reputation, capacity for innovation, and impressive free cash flow yield of 8%. At present, the company's shares are trading at less than 10 times the projected EV/CY25 EBITDA.
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The firm is looking forward to additional details from the new leadership on their strategic plans. As the market anticipates the upcoming earnings report, Rosenblatt's analysis underscores a favorable risk/reward scenario for Sonos' investors at the current stock price level, supported by the company's healthy current ratio of 1.51 and management's aggressive share buyback program.
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